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Dear tutor,
In the subjected question, the firm has been intimidated by current significant client to provide tax planning and tax computations for another potential client, but ACCA answer in “ethical issues”, has only covered tax planning threats (self-review and management) and safeguards. Tax computations is totally ignored?
Thanks,
No it’s not ignored, it’s implicit, for example:
“A self-review threat could also rise if the tax figures [i.e. of the computation] are material to the financial statements because Pointer & Co would have some input to the tax figures [i.e. because they have been computed] which form part of the financial statements ….”Dear tutor,
Understood. Audit firm will also be taking management responsibility while computing tax figures. Taking mngt responsibility is allowed if safeguard is applied i.e., if management makes all judgements and decisions. Correct?
Thanks,
Yes if not public interest entity – but remember “management responsibility” is not separate category of threat.
In the middle of page 25 of the notes “The provision of many non-assurance services will create a self-review threat (eg bookkeeping, internal audit, tax calculations and valuations material to the financial statements).” Safeguard for this threat would be separate engagement teams and/or review (page 29).
For a public interest entity, if tax is material (this is likely), the auditor cannot do tax calculation (see https://opentuition.com/topic/tax-service).
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